How do Payment Gateways Work?

Here at PAYFORT we live online payments day in and day out, and we sometimes forget others don’t do the same. That’s why this week we’re going to be looking at what exactly a payment gateway is and what it does for your ecommerce business.

If your operating in the world of ecommerce you already know that using online transactions is the fastest and most convenient way to settle payments. With the reach of the internet growing every day, online transactions let just about anyone to easily buy or sell products all around the world.

But transactions online also bring potential security threats and robust payment security is required to avoid false charges. This is where payment gateways come in, they help businesses capitalize on the benefits of online transactions while protecting their customers from threats.

What is a Payment Gateway?

Payment gateways are specialized pieces of software that authorize and manage payments for customers, merchants, and banks while providing added security to all parties. When implemented correctly, it acts as a seamless connection between e-commerce applications and credit cards processing networks or banks.

A payment gateway is a middle man between merchants and customers that make sure a customer’s money is securely transferred from their account to the merchant’s. They are essentially the virtual equivalent of the terminals that are still used in brick and mortar stores.

How it works?

As we outlined above, a payment gateway is responsible for authorizing transactions between customers and merchants. Here are the basic steps on how it works:

Step 1: It all starts when a customer places an order on a website by pressing the submit order or checkout button.

Step 2: Next the merchant securely sends the details of that customers order to the payment gateway and the transaction is routed to the issuing bank to authorize the transaction.

Step 3: Once the transaction has been authenticated, the transaction is then approved or declined (depending on funds available in the customer’s account) by the customer’s issuing bank.

Step 4: Then the payment gateway relies that message to the merchant.

Step 5: The bank settles the transaction amount with the payment gateway and the payment gateway settles the money with the merchant.

Additional Features

As well as helping to settle money, payment gateways can provide merchants with additional features aimed at helping businesses grow. These include detailed reporting, inventory management, and optimization suggestions. Payment gateways put the control of business payment acceptance into your hands, giving you more control over your business growth.

Does your team know how your organizations payments are processed? Do you use a payment gateway for your transactions? Let us know in the comments below and if you aren’t already be sure to follow PAYFORT on Twitter for more updates.

46 Comments

yoshi silitonga

October 4, 2017 at 2:30 pm

Hello.

im thinking to start a small online dropshipping business selling fashion accessories. im currently a resident of UAE
my question, do i need to have a business license for this? my target market will mostly US and European market. however i need to have the access to withdraw my money here to my local bank

Hello,
4 days ago I had made a purchase from a website called SNEAKER HUNT Middle East and apparently they use your website for online credit card payments. Once I made the payment I received an e-mail from sneaker hunt pay fort stating I actually made the payment. then I received another email from sneaker hunt customer service saying that it takes a couple of days to clear my credit card payment. I wanted to ask is this true you work by bank transfers not direct online payment as any other website ?

Hello Ahmed,
Thank you for getting in touch!
We are an online payment provider and we do not support bank transfers.
What might have happened is that the merchant only authorized your transaction without deducting the amount from your credit card right away, and in that case it would take several days for the amount to be captured.

Hello Amit!
Thank you for getting in touch!
If you can please access the below link where you will answer a few questions about your business, then you can book a call with a PAYFORT member to better discuss your inquiries:

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Hi.. I am working in Saudi Arabia. And I want to make an eCommerce website to sell my products in my shop. Soyour services are available in Saudi Arabia..?? And can you advise what are the legal documents are needed to start an eCommerce in Saudi Arabia..

Hello Muhammad,
Thank you for getting in touch with us!
Yes we do provide the service in Saudi Arabia, and if you follow the link below you can register to our service and get in touch with our KSA team:https://www.payfort.com/get-started/

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Thank you for getting in touch with us!
The customer would pay directly to your merchant bank account, which Payfort opens for you with one of our acquiring banks. The money is then settled into your corporate bank account based on the agreed settlement period with the acquiring bank (1-2 weeks average).

For more information, please click on the below link to get in touch with our team